Are Florida Short Sales Right For Your Retirement?

From time to time it has been reported that Florida (along with California and Nevada) has one of the highest rates of Short Sales and Foreclosures. Often it is then suggested that one should rush down there and buy one of these distressed FL properties at a giveaway price. Most are familiar with what a foreclosure entails. But what is a “short sale”?

A short sale occurs when the proceeds from the sale of a house fall short of what the owner still owes on the mortgage. Many, but not all lenders will agree to accept the proceeds from a short sale and forgive the rest of what is owed when the owner cannot make the mortgage payments. A successful short sale precludes the property from going into foreclosure, an outcome that is beneficial to both the owner and the lender.

For the owner, their credit score will typically drop by 80-100 points from a short sale. Going through foreclosure would cause it to drop by 200-300 points and it would take about three years before the owner could get a mortgage on another property at a sensible rate. It would take a wait of about eighteen months for a person who went through a short sale to buy another home at a good mortgage rate.

Here are some pitfalls that could occur if you find and want to get involved in buying a “short sale” property for your Florida Retirement:

You must purchase the property “as is”. It’s unlikely that the seller will be able to make repairs or offer compensation for defects. The lender may want to close immediately if it approves the sale.

In FL condominiums, owners may have stopped paying the association fees, causing liens and other types of negative title issues to be dealt with.

If the seller is obligated to more than one lender, all must agree to the sale or no deal. Communicating with the lender and getting authoritative answers may be a problem, especially if it is a large organization. Be aware that the lender will always be trying to get an amount equal to their loan amount from you in any offer/counteroffer exchanges.

It is generally recognized that foreclosures and short sales are helping to set today’s fair market values on comparable Florida properties. They have been the weight that has been pulling down the asking prices that realistic, non-distressed sellers have been placing on their homes.

Since this is the case, then it suggests that one doesn’t need to actually participate in a short or foreclosure sale to benefit from the effect that they have on lowering prices across the board.

One final word of caution; Real estate pros are active every day in this market with resources that are not available to the individual. If I found a property that I thought was a great deal, I would question why the pros left this one for me before signing the P and S agreement!

For more analysis and strategy on Florida Retirement topics, get your digital or hardback copy of “The Florida Retirement Book – An Insider’s Guide”.